Element Solutions Posts Q1 2022 Financial Results

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Element Solutions Inc has announced its 2022 first quarter financial results. 

• Net sales of $680 million, an increase of 24% from the first quarter last year on a reported basis or an increase of 7% on an organic basis
• GAAP diluted EPS of $0.23, compared to $0.33 in the same period last year; adjusted EPS of $0.38, compared to $0.37 in the same period last year
• Reported net income of $56 million, compared to $82 million in the same period last year
• Adjusted EBITDA of $145 million, an increase of 9% from the first quarter last year on a constant currency basis
• Increases bottom-end of full-year 2022 guidance for adjusted EBITDA to $580 million to $590 million, despite increased additional FX headwind of approximately $5 million
• Reaffirms full-year 2022 guidance for adjusted EPS of $1.55 to $1.60
• Element Solutions Inc (NYSE:ESI) (“Element Solutions” or the “Company”), a global and diversified specialty chemicals company, today announced its financial results for the three months ended March 31, 2022 

Executive Commentary

President and Chief Executive Officer Benjamin Gliklich said, “Our businesses once again delivered strong results in a complicated business environment. We saw robust demand across many of our key end-markets in the first quarter despite increased macroeconomic uncertainty and ongoing cost inflation. The team is executing well to capture value from the megatrends propelling our Company. Electronics momentum continued, growing 8% organically with particularly strong contributions from semiconductor and memory disk applications. Industrial & Specialty also grew organically in the mid-single digits in the quarter, despite continued automotive production softness, which speaks to the quality of our diversified portfolio. Despite margin pressure from inflation across all categories of our costs and mix, first quarter adjusted EBITDA grew against a difficult year-over-year comparison."

Gliklich continued, "Strong sales growth, coupled with inflation and the continuing scarcity of key raw materials, led us to invest significantly in inventories, impacting first quarter free cash flow. This is a trend that should abate as and when supply chains stabilize. We expect this to help cash flow improve sequentially in-line with historical trends for our business, which should lead to a net leverage ratio of close to 2.5x adjusted EBITDA by year end. While the macro environment became more complex and challenging over the course of the quarter, the strength in our results gives us confidence to increase the bottom-end of our full year 2022 adjusted EBITDA guidance, despite incremental foreign exchange headwinds. I am very grateful to our excellent team who put forward an extraordinary effort again this quarter and delivered another strong result.”

First Quarter 2022 Highlights (compared with first quarter 2021)

- Net sales on a reported basis for the first quarter of 2022 were $680 million, an increase of 24% over the first quarter of 2021. Organic net sales, which exclude the impact of currency changes, certain pass-through metal prices and acquisitions, increased 7%.

• Electronics: Net sales increased 21% to $427 million. Organic net sales increased 8%.
• Industrial & Specialty: Net sales increased 29% to $253 million. Organic net sales increased 4%.

- First quarter of 2022 earnings per share (EPS) performance:

• GAAP diluted EPS was $0.23 for the first quarter of 2022 as compared to $0.33 for the first quarter of 2021.
• Adjusted EPS was $0.38, as compared to $0.37 per share in prior year.

- Reported net income was $56 million for the first quarter of 2022, as compared to $82 million for the first quarter of 2021. The first quarter of 2021 included $28 million of foreign exchange gains, primarily associated with intercompany debt, that did not recur in the first quarter of 2022.

- Adjusted EBITDA for the first quarter of 2022 was $145 million, an increase of 5%. On a constant currency basis, adjusted EBITDA increased 9%.

• Electronics: Adjusted EBITDA was $97 million, an increase of 5%. On a constant currency basis, adjusted EBITDA increased 7%.
• Industrial & Specialty: Adjusted EBITDA was $48 million, an increase of 5%. On a constant currency basis, adjusted EBITDA increased 12%.
• Adjusted EBITDA margin decreased 370 basis points to 21.3% on a reported basis. On a constant currency basis, adjusted EBITDA margin also decreased 370 basis points.

- Net debt to adjusted EBITDA ratio of 3.2x on a trailing twelve months basis.

2022 Guidance

For the full-year 2022, the Company increased the bottom-end of its financial guidance for adjusted EBITDA to a range of $580 million to $590 million, and reaffirmed its full-year 2022 financial guidance for adjusted EPS of $1.55 to $1.60 and free cash flow of $310 million to $325 million. For the second quarter of 2022, adjusted EBITDA is expected to be approximately $140 million.